Subject: Case assignment 5 - Valeant Pharmaceuticals – Case 28
The transaction between Valeant and Biovail would be characterized as a horizontal merger. This is because both Valeant and Biovail are in the same industry of pharmaceuticals, serving customers the same way. The merger eliminated a competitor, which increases market power. The reverse merger allowed Biovail to acquire Valeant.
At the time of the merger, Valeant’s new business strategy focused on shifting investment from Research & Development to acquiring small in-line undervalued products and companies. Valeant seeked to increase shareholder value and felt this could be done by merging with Biovail. This decision increases market power.
The integration was deemed as a, “Combination of two well known and respected specialty pharmaceutical companies to create a superior combined specialty pharmaceutical company (Valeant).” The merger would allow for, “A larger, more globally diversified company with a broader and better diversified range of products. Valeant’s and Biovail’s product lines and geographic markets were complementary (Valeant).” Therefore, little competition would be recognized as coinciding.
“Additional revenue growth opportunities presented by the expanded product offerings and stable cash flows from legacy products anticipated to support future growth (Valeant).” These all indicate a successful integration would occur. The two companies had compatible cultures and similar characteristics, encouraging a positive integration. “Valeant was able to overcome barriers to entry and potentially reduce the number of competitors (Valeant).” This could be attributed to fusion elements of both brands.
A downfall due to the integration would be noticing human issues and restructuring. Valeant needed to reduce unnecessary positions. “Valeant targeted 1,100 jobs (approximately 25 percent of the combined workforce) that were considered redundant for elimination (Valeant).”...